2007 (6) TMI 438 - AT - Central Excise

Summary

Issues:
1. Eligibility for exemption under Notification No. 217/86-C.E.
2. Removal of impugned goods from the Bonded Store Room without payment of duty and without intimation to the Department.
3. Interpretation of the term "used in or in relation to the manufacture of final products" in the context of refractory bricks and motors.

Eligibility for Exemption under Notification No. 217/86-C.E.:
The case involved excess stock of refractory bricks and motors found outside the Bonded Store Room within the factory premises. The appellants claimed exemption for these goods under Notification No. 217/86-C.E. The lower Appellate Authority initially ruled against the appellants, leading to the appeal. The learned Advocate argued that the impugned goods were used for repairing and re-lining furnaces/kilns within the factory, which were in turn used for producing refractory bricks. Citing previous Tribunal decisions, the Advocate contended that similar refractory materials had been allowed the benefit of the notification for such use. The Tribunal found the appellants at fault for not accounting for the goods properly but interpreted the notification liberally. Considering that the refractory materials produced were ultimately cleared on payment of duty, the Tribunal held that the impugned goods were used in relation to the manufacture of final products, making the appellants eligible for the exemption.

Removal of Impugned Goods without Payment of Duty:
The Department contended that the appellants should not have removed the impugned goods from the Bonded Store Room without paying duty or informing the Department. The Department found it surprising that the appellants initially described the products as defective and broken but later claimed to have used them for repair and maintenance. Despite acknowledging the appellants' fault in not properly accounting for the goods, the Tribunal focused on the liberal interpretation of the notification and the actual use of the goods in the manufacturing process. The Tribunal determined that the appellants were liable for a penalty for the unauthorized removal of goods, setting it at Rs. 25,000 instead of the higher penalty imposed by the lower Appellate Authority.

Interpretation of "Used in or in Relation to the Manufacture of Final Products":
The Tribunal analyzed the phrase "used in or in relation to the manufacture of final products" as mentioned in the notification concerning refractory bricks and motors. While the Department raised concerns about the condition of the goods and their removal without duty payment, the Tribunal emphasized that the key factor was the actual utilization of the goods in the manufacturing process. Despite the goods being defective and unsellable, their use in repairing and relining furnaces/kilns within the factory was deemed sufficient to meet the criteria of the notification. The Tribunal's decision highlighted the importance of the goods' contribution to the manufacturing process rather than their marketability.